Trump Steel Tariffs Will Hurt As Much As They Will Help: Deaux

Well as we've been reporting Commerce Secretary Wilbur Ross saying that the Trump administration will impose new duties on steel and aluminum imports from three key trading partners, the European Union, Canada, and Mexico. And here to tell us more about this is Joe Doe. He is our metals and mining reporter for Bloomberg News and you can follow him on Twitter at Joe Dough And that's d E a u X for dough. All right, Joe Doe? Why are we doing

this to three entities that are ostensibly our allies? You know, I had a source yesterday on the phone tell me when we were gathering that this would likely happen. Say, it looks like the administration is finally having their welcome to Queen's moment. The only problem is a welcome to Queen's moment only works in real estate and not in global trade? What is a welcome to Queen's moment? Essentially saying this is New York, this is our territory, and

you're gonna play by our rules. And um. The Trump administration, as we know, brought this up back in April of last year. I mean, he's been talking about something like this since the beginning of his presidency. But a year later, one of the things that we kept hearing was, you know, we think he might actually just pass the tariff on everybody. And the thought behind that is nobody gets away from it, and it doesn't matter who you are or what you are.

We're going to protect this industry. Uh. They have now done it, and yeah, okay, so so let's just take stock of where we are. So Wilbur Ross today Commerce Secretary announced these tariffs, said that there was not going to be an exemption for some of our main trading allies. Mexico already has come back and said that they are

going to reciprocate with either tariffs or other measures. You have discussions now that the reason why the tariffs are going ahead is because now after talks were insufficient from the White House is perspective, where do we move forward with this? I mean, if this was a negotiating tool, it's over. So what does that mean going forward? So I think there's two ways of moving forward. There's the there's the markets. Right, so the markets just play by

the rules. They say, listen, we've got to accept that there are these tariffs on aluminum imports and on steel imports, and you just have to deal with it. So any customers that want steel or aluminium that's outside of the country, they gotta pay that premium, they gotta pay that duty. And that's that's that right. And so you just go back to normal and you act like whatever is now in place is just how you play by the game. Politically,

it's a mid term season. Uh, there's a question as to whether or not this protection ism will play up well in battleground states, battleground districts, and that part is yet to be seen. Uh. We know that companies don't necessarily benefit from this. American companies, ALCA, the biggest aluminium maker in the United States, probably the best known aluminium maker in the world, will not necessarily benefit from these because they actually produce more of their aluminum in Canada

than they do in the United States. Uh. These steelmakers generally look like they'll benefit from this, but steals a much more domestic industry. I mean, six of our consumption of steel is made in the US. Only fift of what we consume from aluminium is made in the U S. Canada makes nearly fifty of aluminium that we use. That's what makes this a big deal. The EU, on the grand scheme of things, not that big of a producer

for aluminium the steel used in the US. The EU is big because of the larger trade implications that this has. The you is moving because now they have to react to our tariffs because of the worries that dumping will no longer be in the United States, it will instead

go to the EU. So politically, the EU says we're raising trade barriers and retaliation to the United States, but in actuality, they're raising trade barriers because they need to protect their own industry as well, because other countries will start trying to dump there because they don't have to pay the tariffs. So there's so much going on here and now that this has come into place, we're gonna see it play out. I don't know if this was something that I expected. I don't know if this is

something that the market expected. But it has happened, and now this is the new reality, and we're going to see whether or not Trump actually making good on a truly Trumpian policy is going to benefit or hurt him in the long run. Is this going to hurt US consumers? U S consumers have already adjusted to these higher prices, they expected some sort of higher prices would come. The people who end up probably getting hurt of the makers,

the manufacturers of the stuff that we use. So if you're ariconic, you make airplane wings, you make pieces used an automotive. Actually the same with any steel producer outside of the United States sending to Detroit. These are the ones that are really worried. That's why Caterpillar would even say whoa, whoa, whoa. Let's hold on a second here. So I was just looking at Ian Bremer he just put out on Twitter. Trans Atlantic relations just hit a new post war low. But we're not at bottom yet.

Can you give us a sense of the last time that the US imposed tariffs like this and what happened we imposed terrorists? It was a two oh one petition by President Bush back in two thousand two, and it was to protect the industry that was getting hurt. What eventually happened was they passed the two oh one and there was so much outcry by industry across the board that they started giving exemptions and rolling things back, rolling

things back, and ultimately saying, forget about. We're just we're getting rid of this entire policy, and they scrapped it. That's no pun intended, but they got rid of it because it was just so unpopular and for businesses, very detrimental. Just to your point, Caterpillar shares down nearly two right now, there you go too, doo. Thank you so much for being with us. We will be hearing more from you

as this does play out. Really important inside. Joe Doe covers the medals and mining industries for us here at Bloomberg News, and we've just been talking about how Commerce Secretary wolver Ross did say that the European Union, Canada and Mexico would all not be exempt from these steel and aluminium tariffs. What keeps money managers up at night, Well, that's why we've got a John Moniger. He is a managing director of Eaton Vans, helping to manage over four

hundred and twenty billion dollars. He's based in Boston, but he joins us here in our eleven three oh studios. John, it's a pleasure to have you here. And eating Vance Advisors has something called the Top of Mind Index. Tell us what is this index? What is it supposed to do? Yeah, Pim, thank you for having us today. So the Advisor Top of Mind Index is a survey we do every quarter.

We survey about a thousand advisors and it's really trying to get in the mind of what's on their mind and what's on the mind of their investors that they're working with. And so through that survey you try to get some insights into what's driving their decision making. Uh. In particular, if you think about what's going on now,

I'll just give you the highlight of of this particular survey. Um, we had volatility continue to be one of the top marks in top concerns of advisors and maybe not surprising by any means, income being number two and a bit of a distant number two. We've seen that kind of move around a little bit from quarter to quarter, but certainly volatility kind of really driving a lot of what's on their mind. And I would say the number one cause of that has really been centered around geo political risk.

So although we see a lot of market movement, it's a lot of things like even what we saw this morning with you know, tariffs being put in place, which is you can question, both has a downstream effect but also just has a headline or effect as well, makes people really nervous. So can you connect the top of mind index to actions? I mean, if they're worried about volatility, that means what for how they manage their money? Yeah, that's a really great question. So so what we're seeing

is a few things. You've seen this in just fun flows, and we'll see this in the survey as well. Start with the survey, I'll connect it to fund flows. In the survey, you'd see number one issue, what are they doing about it? Short duration strategies on the fixingcome side is where they've been going in a pretty big way. So we've seen a pretty big pull down and flows in equities, we've seen a pretty good resurgence of fixing come flows. But really on the short duration side, let

me drive into that for a minute. So what we're seeing specifically is floating rate strategies picking up makes a lot of sense rising rates. What can I do to participate in rising rates is certainly floating rate strategies, But also you're seeing just traditional your duration strategies moving in in a very big way. In fact, if you look at the fund flows just in the last six months alone, but a hundred fifty three billion dollars have come into

taxable fix income. But about that was short duration strategies. Again, you'll see a pretty good move going on. There are people not sure where to go. What do I do? I put into more of a conservative play, I'll add. The one that we're seeing as quite interesting is on the municipal bond side. We've seen a lot of pressure muni bonds certainly performances negative year today and pretty much cross the board, we've seen some movement in the floating rate muni bond area. We don't hear a lot about

that in the marketplace. We actually offer one of the few strategies that do this, but other firms do it. There's firms that are out there that play in the space in floating rate municipal bonds. Actually have higher quality and are certainly great place to participate in today's markets. John, I want to get your thoughts on what the customer is really interested in, because I thought this was a

very telling point. And you know, you can debate and and you know, if you're kind of drawn just investor, you can say, well, you know, responsible investing. It sounds nice. It's got a chief feely thing to it. Whether whatever you're feeling or thinking about it. The reality is the customer is really interested in this. There is no question. Thank you for bringing this up. I'll tell you the in the survey will tell you two thirds of investors

care about responsible investing at some level. It might be at a minor level, might be I want to restrict something in a portfolio, or it might be at a very deep environmental, social and governance type level, and we're seeing the full spectrum of that. The flip side of that as advisors aren't as educated, so they're a little more nervous to bring this forth to their investors. I'll tell you two quick stories. One, um, that's the number

one asked. We put in place a very strong educational effort to educate the financial advisor on how to actually

have this conversation with a client. Importantly, though, if you look at the elite advisors the top in the space today, I would say we've seen a shift, and I would say in the shift has only occurred in the past twelve months, where they've went from being prepared to have the conversation to now leaning in and saying, Wow, this is now a conversation I have to have every client so they know I'm prepared and can actually have this

ability capability to deliver responsible investing to their investors. So that's a big shift that will transcend, no question, as we know, down into the other advisors. So the educational ask is becoming I would say, greater and greater every single day. And this comes after yesterday to Sporting Goods reported better than expected earnings even though they had stopped selling guns in response to what happened. Their shares gained

almost twenty six percent. That's flying in the face of a lot of people who said, you know what, if you stop selling guns you make this big stance, You're gonna suffer. They didn't. So with returns and sort of you know, doing good and getting returns, I mean the focus is still on getting returns right, So how do

you how are you instructing people have that conversation. Yeah, it's a great question because because there are return matters most right, at the end of the day, responsible investing is only as good as the fact that you can put up returns out are in line with the market. We have through our Cavert affiliate as an example or parametric we've been able to demonstrate a long term track

record of that just using basic indexes. Frankly, so putting an E s G structure on top of an index like the Russell one thousand, we can demonstrate ten years of performance at show we can match the market. Many other organizations do the same thing, so we're not alone in that. I think the markets starting to realize you can actually get better performance, or at least market level

performance by actually doing the right thing. And it starts to make sense when you start breaking down take foreign countries, take emerging markets, for example. If you have really solid social governance and environmental considerations built in your portfolio and you're acting against that, they tend to do better. And we've got again a history of showing that in our portfolios, or we're able to uh to outperform over periods of time, and again we're not the only ones in that space

doing it. John Moninger, thank you so much for being with us and for illiminating the results from the top of Mind Index or a tomics. John Moninger is managing director at Eton Vans, overseeing about four billion dollars. Normally it is based in Boston, but joins us here in our eleven three oh studios. Is Italy an emerging market? Is it like Argentina? Is it like Turkey? Well, let's find out. We have Damian sasaur fixed income strategist for

Bloomberg Intelligence in the studio here to tell us more. Damian, so is Italy on par with an emerging market? I wouldn't say that, especially Argentina and Turkey. Um, what we're seeing here, I think is a good old fashioned run on the on Italian bonds, right. I mean, it's how Italy is basically one of the largest issuers of debt

globally um, far larger than Turkey or Argentina. But the important thing for remembers that all that debt is denominated in Europe, right, so in order for it to trade even close to Argentina and Turkey, which which I mean if you're investing in those bonds are carrying in Lira and UH and pacer respectively. I mean, it's just it's just far riskier when you do that cross border currency calculation. And so for me, I just don't see how your denominated Italian bonds are trading on par with them or

how you can even compare them at this stage. But they are, but they are kind of I mean, if you look at credit to fault swaps, for example, Italy is looking more like an emerging market. See so I set you up for that, and then you dissed me. You would, just would It's just a quote you said. Now, I mean five year cd explain, explain what that all means.

So so in order to protect against the default, one might buy a credit the fault swap, and so five year CDs for Italy is now on par with that of Turkey in fact that you traded through Turkey, meaning to protect against default in Italy is more expensive than

it is to protect against default in Turkey. So in order for first of all Italy to default, it's got a first break from the EU and then it's got a default on its dead opplications, right, so it's a huge Sorry, no, no, no, I mean to me though, I want to just push back because it makes sense what you're saying. The risk of Italy defaulting at this point does not seem, when you take a step back, like it is greater than Turkey, which can't get its

currency under control. That said, perhaps what this shows is that central banks are losing some control and that everything is mispriced, and Italy is being priced a little bit more on fundamentals with the fear of the ECB stepping back, And maybe the question should be asking, does this mean that the emerging markets should be priced at completely different levels with risk much higher than it is right now? Yeah, I mean, that's exactly what we're talking about. Think about

where we are. Rates globally are still near historical lows, so any little move is a very is an exaggerated move in developed and emerging market right now, and that's

exactly what we just saw in Italy. And in fact, a lot of the move in in in Italian yields and Italian bonds BTPs were was driven by the relative lack of liquidity in those bonds, right, So they just got marked up pretty quickly, and now people are kind of saying, well, maybe things aren't so bad, you know, maybe you know, the five star movements, so on and

so forth. So I think you're absolutely right. I think it has something to do with liquidity and and the structural makeup of the market itself that's kind of driving things. But but you know, as these markets sort of normalized, as the U s he Old curve pushes higher, as rates globally push higher, you're gonna see these dislocations be that much more magnified. Right, rate ball is going up.

I mean, I think we've pretty much hit the psycho volatility those right, Sorry, rate volatility is definitely going up globally, and so as that happens, what you see are these you know, kind of exaggerated moves and and and I think that's quite frankly what's been happening in Italy this week and Spain tomorrow. I mean, I guess you're right. So, I mean that's the other thing, right, I mean, it's

kind of amazing. There is a little bit of a fundamental take to this, because Italy's fundamentals, you know, are not nearly as good as Spain, right, and so Spain hasn't really moved the way Italy has, even though I think the Basques just announced that they're gonna back you know, Sancha. So I think I think Spain is at risk of a no confidence vote, right, so, so that's a pretty big deal. And yet Spanish CDs is not really moving the same way Italian CDs is and and Spanish bonds

haven't really reacted as much as you would have thought. So, um so for me, I guess you know, the the you know what I'm looking at in terms of emerging markets is Argentina and Turkey are on an island all to themselves. Um, you know, their currencies are a mass, their economies are are are are a mess really and you know they're gonna need to really kind of clean things up. It leaves in a different situation. It'll least

still part of the EU until further notice. And in order for anything to kind of, you know, move the needle in Italy, you're gonna have to see you I'm gonna have to see them break from the EU. Has that working in Brazil that truckers strike, So so what's what I took out of the trucker strike? And I'm

not as close to it as I should be. Is the fact that petrol Brass, I mean, you know, basically, petrol Brass makes their money by selling fuel and last week what happened was they made the decision to a lower petrol prices and they did it and partly in response to the fact that you have this trucker strike, and you know that the government may be applied a little bit of pressure to petrol Brass, to petrol Brass despite the fact that sixty some odd percent owned by

the Brazilian government, it's not part of the government. And people who are invested in Petro Brass bonds, when they're quite a few of them, um like to think that the company is making decisions that are in the creditors best interest, meaning we're going to charge you more for your gas or your oil. And that's not what happened here. So now people are kind of saying, well, we'll wait

a second. Maybe Petrol Brass really is being pushed by the government, Maybe they don't have our best interest at heart. And I think that's why what we're seeing, at least in petrol Brass, which is one of the largest constituents in emerging market hard country that is, you're seeing you know, spreads blow out on the back of that, and people you know, kind of calling into their calling into question

their integrity and the efficacy of management. Okay, I want to I want to go back to a point here, just on a broader level, with emerging markets. If we're talking about how all risk has been muted by central banks, and then a flare up causes people to suddenly uh price fundamental risk, you know, and then it goes back to this sort of complacency. I'm just wondering how much would emerging markets have to read price if people started

to feel like central banks weren't back stopping the market. Well, I think sentiment is a function of returns, and e M has is off to the worst start on record this year, right, And as those losses build, or let's not say they build, but let's say they persist, sentiments starts to sour for the asset class at large. And I think that's the real risk because Okay, fine, you

know things are still good, the economies are still healthy. Yeah, okay, yields are climbing, and we're pushing the currencies uh down, you know, relative to the dollar. But but by and large things are better today than they were, you know, only five years ago, and emerging markets. But the longer these losses persist, that drives investors who are invested in

emerging markets to redeem, to basically withdraw their investments. And that's gonna basically make it that much more difficult for these local economies to to to to borrow and too and to lever up, and and and and to run their economies. And and that's when it hits the real economy or the real economies within emerging markets, right and that's when you know, you really can start to feel the pain, and that transmission mechanism doesn't happen overnight. Certain

countries are different than others. Turkey, which has a lot of external debt, you're seeing them get smacked right on, you know, because it's a liquidity issue right now. In Turkey they can't refinance their debt. But at a place like Brazil, it's not a liquidity issue, it's a solvency issue, right.

They have long term structural problems pimped to your point, you know, with trucker strikes and all the things that are going on there with you know, social security, you know, and what have you, but but that's a long term issue in Brazil and and and that's why Brazil is not getting hit as badly. Just real quick, are we starting to see those withdrawals in any real volume. We've been seeing them and they're not. I mean, look, they've started to peter off a bit um. In fact, what

you saw was a kind of a transfer. It was it was e M debt that was driving the outflows for the better probably the last few few months, and that shifted over to the equity side, which to me is maybe an indication that we're getting to the ninth inning there and that things might get a little better. Damian Sassaur, we love having you on. Thank you so much for being with us. Damien Sassaur, fixed incomes strategist for a Bloomberg Intelligence and expert in developing mark gets.

Really an interesting story. It's amazing to see Italian credit default swaps trade in tandem with those of Turkey. It has come to light that your personal data is worth a lot, and the more people realize this, the more questions that are about who profits from this data. Joining us now Brian O'Kelly, chief executive officer and co founder of app Nexus. It is an exchange the second largest only to Google, behind only Google's Double Click exchange for

real time bidding on the Open Internet. UM. And basically, if I understand this correctly, when advertisers want to figure out what to pay for you personally to view a certain ad of theirs on say whatever, pick your news site, you your platform helps them auction off at particular place in real time, correct exactly, So you're assessing how much people are worth. So do you feel like there has been a market pushback recently, especially as the European Union

enforces the General Data Protection Regulation? Has there been more kind of obstacles for you in this process? It's interesting as long as you're as a consumer aware that you're going to be advertised to, UH, in concept, you should be okay with it. The idea here is that privacy is a fundamental human right. But if you decide that you want your information used by advertisers in return for free content, so that new site you're going to, that

content is free for you because of the advertising. As long as you're comfortable with that trade, you should be comfortable with advertising. And so, because we've always operated within those constraints, UH, this is probably a good thing for our business overall, but it certainly is causing a lot of chaos and confusion across the market. Who's best at figuring this out? I mean, is that the Is it Google? Is it Facebook? I mean, who's actually really good at it?

And who's terrible? Well, it's funny if you think of who really deeply understands privacy. Uh, I don't think anybody does. I don't think we as humans have figured out what it's going to mean to have all of our data floating around in the cloud for the rest of our lives. Um. So I think it's the regulators in Europe trying to take a first step. I think there's some small companies like app Nexus that are starting to think about what

does advertising mean and a privacy first a privacy first world. Um, but we're just learning what this is going to mean. So, Brian, there's been some discussion about how the GDPR Europe and other privacy rules are going to make people realize, Wow, my data is valuable. I should be making money from it. Do you see that happening where people directly get income

from advertisers. There are programs where they do so. Amazon has an affiliate program where if you put an Amazon ad on your site, you know, they'll pay you for all the products that are sold through that links. An example. Um, I think the challenges that we're already getting value from our data through the content. So if I'm you know, on on Facebook and I'm seeing my friends baby pictures for free, I guess, um, that's being subsidized. All the

servers and engineers at Facebook are getting paid by ads. Pam. I get the sense that he doesn't necessarily view his friends baby pictures as a benefit, but I would pay a lot of money for that. Okay, Yeah, But I think you raised an interesting point because there's on the one hand, there's this big conversation about privacy, right, you know, there's a debate about it. Oh, everyone wants to secure

everything and so on. But when it comes to saying, oh, um, we'll give you frequent flyer miles or we'll give you some kind of bonus if you type in your age and your address and your zip code, oh we want that, right, So they want the plus side, but they don't want the negative. I guess you're right. I mean, at the end of the day, it's all about out you know. Value transfer. So I'm willing to tell you my age and my my gender because it doesn't cost me much. You can just look at me right now and I

can probably infer it. Um. I'm not giving up much information. Now. If I told you that I, you know, I am an active road gain user, you might be like, ah ha, I can market to this man, and I might not want that being broadcast. We're not live, right, so you know that's the thing I might want to Okay, good, good, all right, So let me follow that up. Then, are publishers getting a fair shake when it comes to the information that they think they're receiving from the intermediary between

them and their supposed online customers. Now that's the hundred billion dollar question. Google has built a hundred billion dollar revenue business basically being that intermediary between publishers and the consumer. Facebook has built a massive business where all they do is take those baby pictures, layer on ads and sell

them back effectively to other consumers. So I don't think that journalists and other real producers of content of high quality editorial journalism are getting full fair value for that. And I do think that's the thing that we as a society are going to be really confronting over the next few years. Perhabit the advertisers, are they getting real information when it comes to who they think they're reaching?

I would argue no. Um, you know Google has used this European privacy law to restrict the data that advertisers can get. So as a publisher, you can give your data to Google. As a consumer, you can give it to Google. As an advertiser, you can give it to Google,

but nobody gets it back. So I want to talk a little bit about app nexus because I think it's a fascinating idea that in real time you can auction off space on a website to advertisers and see who bids the most for a specific viewers data and their eyeballs for that moment. I just want to figure out how much the costs of arry, how many advertisers bid on each spot. I mean, how how active is this?

It's incredibly active. So on a given impression, so a video or a website, as you say, um, there can be hundreds or thousands of advertisers bidding and for a really high value user. Um, let's say someone who just searched for a vacation on a travel site, you can see bids up to a thousand dollars per thousand impressions, so a dollar per ad which is amazing at the skill of the Internet. And then for other users you might see it in the pennies. So huge range of

interest in different users in different contexts. So just to be clear, the way that advertisers know who is looking at them is that they use the cookies, uh and sort of the information that they can glean from the website. UH that is sort of asking them to be present on and they also use the context. So someone who's listening to this show right now is probably a very high value user just because of you know, how great

this content is. And so of course, so an advertiser might say, I'll pay more for that show than I would for you know, some random stream on on Spotify no one's ever heard. Um. So it's both who you are and what you're listening to or what you're watching or what you're doing. Interesting. Many thanks to you for coming on and sharing this with us. I guess it just reminds everybody that there's a lot that we don't know about what goes on online. I love the idea

that somebody who just booked. A vacation is red meat. It's like, Oh, we gotta sell them stuff. You're gonna be buying lots of stuff, so travel insurance, you'll get those. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg radioh